By Kim Yoo-chul
Staff Reporter

Samsung Electronics' memory chip business is expected to return to the black in the second quarter thanks to production cutbacks and steady rises in chip prices.

Samsung executives and analysts also say the increased portion of highly-advanced DRAM and NAND flash memory chips in its sales has also helped the company to save manufacturing costs.

"Samsung's memory chip unit will post 182.1 billion won in operating profits during the April to June period," said Lee Ka-keun, a market analyst at IBK Securities & Investment.

Samsung is the industry leader in both DRAM and NAND flash chips. DRAM chips are widely used in traditional PCs, while NAND flash chips are used in high-end handheld electronic gadgets.

Hit by a plunge in chip prices, weaker demand for electronic devices and higher inventories, Samsung's memory chip business posted operating losses for the second consecutive quarter.

In the first quarter, the benchmark DRAM prices fell by over 80 percent year-on-year, while NAND prices decreased by some 40 percent, market watchers say.

Since early April, chip prices have been showing signs of a mild recovery on hopes that eased worries over the global economy may spur consumer demand for electronics gadgets.

Samsung had struck a deal with Apple to supply 70 million NAND flash chips for new iPhone models.

"Micron Technology of the United States and Elpida of Japan don't expect profits in the latest quarter as manufacturing technologies adopted by the companies have at least a one-year technology gap with Samsung," said Lee Sun-tae, an analyst at Meritz Securities.

"Producing enhanced chips by using 50-nanometer level processing technology in DRAM and 40-nanometer level in NAND will also help Samsung price-wise," Lee added.

Samsung officials and market watchers say the upcoming quarters could be better as seasonal factors approach.

They add increasing sales of e-books and budget PCs could generate big orders for chips, alonsidee the introduction of Microsoft's new Windows 7 operating system.

yckim@koreatimes.co.kr